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Heavy taxation is the cause of China’s lack of angel investors, Xiaomi CEO says

Lei Jun, CEO of Chinese smartphone maker Xiaomi, made provocative comments on angel investment in China at a panel discussion at the 10th World Economic Forum Annual Meeting in Tianjin on Sunday.

According to Lei, the environment for entrepreneurs to start businesses in China is much better than two decades ago, thanks to government policies and the popularization of mobile internet. However, investors mainly come in the form of private equity, and rarely in the form of angel investors or venture capitalists.

“Angel investors of tech companies have to wait 10 to 15 years to see the company grow up. PE investors will probably earn 5 to 10 times as soon as the company they have invested in goes public,” Lei said in the forum.

Lei said that angel investment is like winning the lottery; most of the time there’s no return. Nevertheless, seasoned entrepreneurs can help young entrepreneurs with their money and experience.

“Taxes on angel investments should be collected on a seven-year basis, and the amount equal to what the angel investors have lost in those seven years should be deducted from the taxes they are supposed to pay when the company is earning,” said Lei.

As a rising unicorn startup in China, Xiaomi is reinventing itself from a global smartphone maker to a maker of smart home ecosystems. Besides the Mi 5, Mi Max and Redmi 3S/3X smartphones, Xiaomi has also launched a rice cooker, a TV set, a drone, a wristband and an e-bike in the first half of 2016.

(Top photo from Baidu Images)

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